The Betz Limit and how it affects wind turbines is a starting point for understanding wind devices to generate electric power.
Albert Betz was a German physicist who in 1919 concluded that no wind turbine can convert more than 16/27(59.3%) of the kinetic energy of the wind into mechanical energy by turning a rotor. To this day this is known as the Betz Limit or Betz' Law. This limit has nothing to do with inefficiencies in the generator, but relates to the very nature of wind turbines themselves.
Wind turbines extract energy by slowing down the wind. For a wind turbine to be 100% efficient it would need to completely stop 100% of the wind—but this would require a solid disk rotor. Additionally, the rotor would not turn and no kinetic energy could be converted. On the other extreme, if the wind turbine had just one rotor blade, most of the wind passing through the area swept by the single turbine blade would miss the blade completely and so the kinetic energy could not be extracted from the wind.
Real World Wind Turbine Power Efficiencies
The theoretical maximum power efficiency of any design of wind turbine may be 0.59 (i.e. no more than 59% of the energy carried by the wind can be extracted by a wind turbine). Once you also factor in the engineering requirements of a wind turbine namely the strength and durability in particular, the real world limit is well below the Betz Limit with values of 0.35-0.45 being common even in the best designed wind turbines. By the time you take into account other ineffiencies in a complete wind turbine system for example the generator, bearings, power transmission and so on—only 10-30% of the power of the wind may be actually converted into usable electricity.
The current Wind Turbines designs with their Tower and Horizontally Oriented Rotor have about reached their level of diminishing returns. Their ‘windmill like’ design meets the Betz Limit head-on and suffers its efficiency-limiting effects. To obtain output levels in the 7.5 to 10.0 megawatt range requires extremely large structures, and these designs may be ill suited to survivability in extreme weather conditions. There is increasing public resistance to these ‘windmills’ in high-population areas. The quality-of-life for those living in close proximity to these devices is greatly diminished and the danger of catastrophic failure is always present. If a turbine failure should occur, the results may be catastrophic for example large sections of the turbine may fly off and endanger buildings and people nearby. The nacelle housing the gearbox and the generator is about the size of a small bus and represent dangerous flying objects when they explode.
Short useful life, escalating maintenance costs, rising insurance premiums, and increasing public resistance to installations close enough to dense population areas to not require expensive expansion of the electrical grid has placed severe limitations on the future of ‘windmills.’